Sunday, May 5, 2013

Alibaba Pact Sinks Sina Shorts on Weibo: China Overnight

Bets on declines in Sina Corp. (SINA) shares plunged to a record low this week on prospects the Chinese Internet company's alliance with Alibaba Group Holding Ltd. will propel advertising sales on its social media platform.

Short interest on Sina slid to 0.8 percent of the total outstanding April 29, the lowest since 2006, when London-based researcher Markit started tracking the data. Interest was as high as 5.6 percent Jan. 15. The Shanghai-based company surged 12 percent this week for the biggest gain since September, while the Bloomberg China-US Equity Index climbed 1.4 percent.

Sina rallied from a four-month low after Alibaba, China's largest e-commerce company, agreed to buy 18 percent of its Weibo.com platform April 29, forecasting revenue of $380 million in advertising and social commerce services for the Twitter-like service. Jefferies Group Inc. more than doubled its revenue estimate for Weibo after the announcement and analysts project Sina's sales will expand 18 percent this year, according to the mean of 10 estimates compiled by Bloomberg.

"Alibaba's stake purchase in Weibo set a floor to Sina's valuation, making it senseless for those who used to short its shares to continue do so," Ming Zhao, founder of 86Research Ltd., which focuses on Chinese Internet companies, said by phone from Beijing yesterday. "The companies' revenue projection is a minimum guarantee for the partnership, which will come from sellers on Alibaba's online marketplace advertising on the Weibo platform."

Boosted Sales

Alibaba will pay $586 million for the stake in Weibo, according to Sina's statement, valuing the social media service at about $3.3 billion.

Weibo generated about $66 million in total revenue in 2012, of which 77 percent came from advertising, Sina Chief Executive Officer Charles Chao said on a Feb. 19 conference call. Ad revenue from the Alibaba partnership will start being reflected from third-quarter results, according to an 86Research client note dated May 3.

Jefferies analyst Cynthia Meng boosted her sales projection for Sina's Weibo to $300 million in 2013 and $552 million in 2014, an increase of more than 100 percent from her previous forecasts, according an April 30 note. She upgraded Sina's shares this week, boosting the number of buy ratings to 19 out of 30, according to data compiled by Bloomberg.

Sina slipped 1.3 percent to $56.23 yesterday in New York. The stock is up 12 percent this year, after losing 3.4 percent in 2012 and tumbling 24 percent in 2011 amid concern the Chinese economic slowdown would make it more difficult to monetize Weibo. The microblogging platform had 503 million registered accounts by the end of 2012.

AutoNavi Surges

The Bloomberg US-China gauge climbed 0.3 percent yesterday to 92.48 in New York, capping its second weekly advance. AutoNavi Holdings Ltd. (AMAP), a digital map content provider based in Beijing, led gains on the index, climbing 15 percent in the week to a three-month high of $12.03.

Vipshop Holdings Ltd. (VIPS), a Guangzhou-based online fashion discounter, surged 13 percent this week to $32.90. Vipshop rose to the highest level since its March 2012 U.S. listing May 2. First-quarter sales more than doubled from a year earlier to $268.8 million, according to the mean of four analysts' projections compiled by Bloomberg. The company is scheduled to report results as early as next week.

YY Inc. (YY), a social-network operator also based in Guangzhou, jumped 5.8 percent yesterday to $18.30, the highest level since March 6. Sales grew 131 percent in the first quarter from a year earlier, according to a May 2 statement.

Suntech Power Holdings Co. tumbled 14 percent this week to 61 cents, the lowest price since April 15.

Yanzhou Downgrade

Yanzhou Coal Mining Co. (YZC), China's fourth-largest coal producer, lost 3.6 percent this week to $10.33. The company posted its eighth weekly slump, the longest stretch of declines since August 1998. Bank of America Corp. cut the stock to the equivalent of sell from neutral yesterday.

The iShares FTSE China 25 Index Fund (FXI), the largest Chinese exchange-traded fund in the U.S., added 0.9 percent yesterday to $37.71, extending its weekly advance to 2.1 percent. The Standard & Poor's 500 Index climbed 1.1 percent to 1,614.42, bringing its five-day rally to 2 percent.

The Shanghai Composite Index (SHCOMP) advanced 1.4 percent in its second trading day this week to 2,205.50. The Hang Seng China Enterprises Index (HSCEI) in Hong Kong added 0.2 percent to 10,845.99 for a weekly increase of 0.1 percent.

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